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Whole life insurance does what it says on the tin, it covers you for the period of your entire life, not a term life insurance policy which is a specified time. If you are the holder of whole life insurance policy, your beneficiary will receive a death benefit, rather than the bank as in a mortgage life insurance policy. Often whole life insurance policies pay dividends, as it is an investment, and also accumulate a cash value. Whilst protection is guaranteed, a return on your investment cannot be guaranteed as they are dependent on market fluctuations. If a dividend is paid there is a variety of ways that they can be utilised, they can pay the premium for you.

Whole life insurance is permanent insurance designed to take care of financial needs after death, and as such it has more complex elements than term life insurance and mortgage life insurance. Whole life insurance is often recommended by financial advisors, as it covers a lot of the bases for estate planning and tax planning, because it a form of permanent life insurance. That means that the premiums can last for the period of your entire life.

Whole life insurance is regarded as a subcategory of permanent insurance policies, because it does offer life time protection. However they have a strict pre-condition, that states the premiums for whole life insurance should be paid promptly. It has a serious advantage for long term financial investments, but its added advantage is that it can provide an alternative source of incomes for life's financial emergencies.

Benefits of Whole Life Insurance Policies.

Uniform premium rates over the whole life insurance policy.

In a whole life insurance policy the premium rates provide a method of estate planning because they are constant over the life of the policy. There are benefits to organising this sort of protection when you are young, because the financial burden of whole life insurance is minimal. The second reason why it is better to invest in a whole insurance policy when young is that because the rates are constant if you can afford it when young you will be able to afford the demand of a full life insurance policy when your salary increases. It does not follow that if you leave it until later that your salary increments will pay the premium rates, as of course you will have the same amount of money to pay over a shorter period. That means the longer you wait to get this type of insurance the higher the premiums will be.

Refund of the whole life policy amount

This of course is the major advantage to this type of life insurance premium; it means you are guaranteed full life protection for the whole of your life. A term life insurance policy or a mortgage life insurance policy has a finite term in which you are insured. The holder of a whole life insurance policy does not lose any of the money invested.

The whole life insurance policy can be used as collateral. Because the whole life insurance policy is guaranteed, it is money in the bank and as such it can be used to secure money for other loans.

Types of Whole Life Insurance policies

Whole life insurance policies are further sub-divided into two categories.

• Ordinary whole Life Insurance Policies
• Limited pay whole life policies

Ordinary whole Life Insurance Policies

The tenet behind this type of policy is that the holder of the ordinary whole life insurance policy pays a fixed premium all his life until old age, so that when the policy matures the death benefit equals the amount of the investment paid in. In practise the insured cannot pay the money until the expiration of the policy as the holder is dead before it expires, therefore you can close the policy before death to get the maximum investment benefit from the whole life insurance policy.

Limited pay whole life policies

In this type of whole life policy the insured is required to pay premiums at a uniform rate, but at a higher rate and over a shorter time. The policy does come to an end, it has a term life.

Limited whole life policies have furhter categories

• Interest Sensitive Whole Life Policies
• Universal Whole Life Insurance Policies
• Variable Life Insurance Policies

Interest Sensitive Whole Life Policies

This guarantees that the holder of the whole life insurance policy has sufficient funds to pay the policy premiums. It does this because the policy does not pay interim dividends to the holder of the policy. Those dividends are accumulated and the cost of the whole life insurance premiums is paid from the investments.

The premiums rates are not unvarying they fluctuate with the changes in the market, the price of the premiums can go up or come down. Some companies' policies have a guaranteed minimum interest sensitive whole life insurance policy. This guarantees a minimum return whether or not the investment makes a profit, however this may not always cover the cost of the premium for the policy.

Universal Whole Life Insurance Policies

This is a flexible type of insurance policy, if there is sufficient funds in the holders account it allows for a change in death benefits on an annual basis. However the policy will terminate immediately if there is not sufficient funds to meet the cost of the universal whole life insurance premium. It offers flexibility as the insured can stop and start the payments.

Variable whole life Insurance

The investor for a variable whole life insurance policy has the option under certain conditions to gamble on higher returns. The money deposited by the insured is invested in mutual funds and stocks and shares. When the market is performing well and returning large dividends the investor can reap the rewards.

Premiums for whole life insurance may increase, to coincide with the age of the holder, some policies stop automatically when the holder reaches the age of seventy five.